I sat down to write something on manufactured spending today, but of course the article ended up being far too long 😉
So we’ll do a two-parter instead, in order to break up this complex topic into more digestible chunks.
In the previous two installments of this series, I’ve discussed an assortment of redemption tricks that Miles & Points experts keep up their sleeve. But by and large, what truly sets the experts apart is how fast they’re earning points – most of the them are earning points much faster than they can spend them.
They generally have an ever-growing stockpile of points, far in excess of what they need for their immediate travel plans. Since you can generally only reserve plane tickets and hotels about a year in advance, they’re constantly making travel plans for the upcoming year or so… all while the points continue to flow in at breakneck speed. Eventually you arrive at a point where you know you’re able to travel anywhere in the world, in first class, at the drop of a hat.
How can they accomplish this, and how can you achieve the same? Well, there’s perhaps no topic for which the Mileage Mindset is more applicable than the arena of manufactured spending (MS).
That’s because MS deals are, in general, simultaneously some of the most lucrative and the most short-lived deals, making them by far the most precious.
Because of this, people are thus much less willing to openly share the nitty-gritty details of MS methods. Instead, the generally advised method is to do lots of research yourself and understand the underlying logic behind MS tricks, so that you can find them for yourself.
Today’s article is intended to help you along that process. I’ll stick to Canadian examples since the US examples are much more plentiful and are quite well-documented already. Having said that, in the spirit of MS, our discussion of MS tricks and opportunities will be erring on the generic side, with the nitty-gritty details best left to private communications if you’re curious.
What Is Manufactured Spending?
Manufactured spending is by no means an “obvious” thing to do, especially if you’re new to Miles & Points. It’s the process of making purchases on points-earning credit cards, then finding some way to “liquidate” those purchases into cold, hard cash. You then use the cash to pay off your credit card and are left with – essentially – free points.
MS methods can be classified into those that are free and those that are not free. Free MS methods are ones where the entire process of making a purchase and liquidating it into cash doesn’t cost you anything out-of-pocket. On the other hand, you can also do MS at a cost and it can still be worthwhile – for example, if you found a way to earn high-value points (perhaps by using the American Express SPG Card) at a comparatively low per-unit cost.
Why are MS methods so coveted and kept so tightly under wraps, you might ask? Well, that’s because MS is by nature an exploitative activity. Think about it – whenever you make a credit card purchase, there are interchange fees and merchant fees involved.
If you have an MS method that allows you to make inordinate amounts of credit card purchases and earn lots of points at no cost (or at a disproportionately low cost), someone third party is inherently paying for those points! That third party likely would not appreciate this if they realized what’s happening, and would take steps to prevent you from using them for MS any further.
This concept will become clearer once we look at concrete examples. But it’s important to remember that while MS is legal, it’s also inherently exploitative and a bit of a “hustle”, and it’s up to each individual to draw their own ethical lines about it. It’s not the intention of this article to make recommendations as to what you should do, but rather merely to illustrate what’s possible as far as I know.
Now let’s jump right in. If you’re trying to get in the Mileage Mindset from an MS angle, it’s important to know how to look out for potential MS opportunities. By and large, MS opportunities can be divided into three types:
- Buying and selling
- Prepaid products
- Sending money
Buying & Selling
The idea is simple. If you can buy something for X dollars on your credit card and sell it for X dollars to someone else in cash, you can use the cash to pay off your credit card bill and net X points.
In fact, entire industries have been built up around this. Just look on eBay and you’ll find tons of people engaged in reselling. But reselling actually requires a fair bit of work, and for many resellers it’s pretty much a part-time job. For the purposes of MS, that simply won’t do.
Instead, we are on the lookout for things that are incredibly easy to buy and sell at the same price. For many, many years, our very own Royal Canadian Mint was more than happy to oblige.
The Mint likes to make collector coins, and they used to offer “face value coins” for sale. These coins had face values of $20, $25, $50, $100, and $200, and there would be quite a few varieties to choose from. You could purchase them in-store or online with a credit card, and for online orders there were no shipping fees either.
The intention behind the coin series was presumably to give Canadians a cheap way to dabble in coin-collecting. But since the coins were considered legal tender, you could go to your bank and deposit them into your bank account for face value. That’s exactly what hundreds of people did, earning them several hundreds of thousands of free points.
At some point the Mint implemented a per-household limit on how many coins you could order, but even that was being easily circumvented, so eventually in late 2016 they discontinued the face value coins series for good.
Who paid for those free points, at the end of the day? The Royal Canadian Mint, of course. Not only did they end up with mountains of returned coins, they had to reimburse the banks for shipping fees whenever a coin was returned. It’s frankly a real miracle that the program lasted as long as it did.
Furthermore, this MS method also had quite a significant environmental cost, because all of the face value coins would be sold individually in plastic sleeves, or – for the higher value coins – special-purpose protective cases. All this material would presumably be discarded by those engaged in MS when the coins were returned. Just some food for thought.
When looking for ways to buy and sell stuff for MS, you obviously want to buy at as low a price and sell for as high a price as possible. It’s simple arbitrage, after all. Therefore, don’t forget to leverage things like shopping portals, cash-back sites like Great Canadian Rebates, or in-store loyalty programs like Shoppers Optimum or Petro-Points in order to lower your overall cost when buying items.
While the Mint method is dead, there’s still a few ways you can buy and sell stuff easily and lucratively, though not quite on the same scale. To give you an idea of what the potential returns are, I know people who at a certain point were buying $5,000 in coins a day, every day. I’d love to have seen that guy’s AwardWallet dashboard…
Prepaid cards and/or electronic wallet apps are all over the place, and there’s constantly new products coming up on the horizon. That’s one of the good things about this kind of method: every couple of weeks you’ll hear about a new prepaid wallet or a bank offering a new prepaid product, and you can look into it and check if MS is possible.
MintChip was one example of a prepaid wallet app. In the summer of 2016 the MintChip app was launched, allowing users to load their account with funds using a credit card with no fees. You also had the option of withdrawing funds to a bank account.
After suffering an onslaught of loads and withdrawals by eager MS practitioners for about a week, MintChip quickly realized what was going on and implemented a 3.5% credit card fee, killing the trick. According to their website, they’ve since disabled credit card loading entirely (although some users report still having the ability to load via Apple Pay).
MintChip was clearly the one bearing the brunt of the cost, since they were paying merchant fees on all the credit card transactions but not passing those fees on to the user. Kudos to them for quickly fixing the loophole, but incidentally I don’t think I’ve ever heard of anyone actually using the MintChip app since then.
Lots of prepaid products let you withdraw cash to your bank account; the hard part is finding one that lets you load funds with a credit card for no fee. If you stumble upon one, verify that the transactions don’t code as a cash advance on the credit card you’re trying to MS with (since the interest charges and cash advance fees would defeat the purpose), and go to town.
Let’s leave it there for now. We’ll jump right back into the thick of Prepaid Products later on this week in Part 2, and we’ll also cover the Sending Money class of MS methods. I’ll share some more examples that I consider really quite brilliant, and we’ll continue with the discussion of how to adapt to the Mileage Mindset from an MS angle and what you should be thinking about when searching for MS opportunities.